Published: April 26, 2001
A Partner and a Plan
For many women, the first step to becoming confident about financial management is finding a financial professional. That professional should be able to discuss, in depth, your personal financial concerns and needs. Based on the information you provide, this professional can help you develop a plan addressing each aspect of your financial situation: Where you stand today – your income, assets and liabilities – and where you're headed. A thorough financial plan can help guide your choice of investment strategies, help you manage credit, insurance and tax concerns, and identify ways to meet such important goals as retirement and the transfer of your estate.
A Plan Is a Confidence BuilderPlanning can boost your confidence at managing the many aspects of your financial situation. With a good plan, it's easier to take control of:
Portfolio Management:A plan can help identify – and prioritize – your financial goals so you can choose the investment strategies best suited to your asset needs, time frame and comfort with investment risk. Based in those factors, your financial professional can help you select an appropriate asset allocation strategy – that is, the right mix of stocks, bonds and cash for your portfolio.
Credit ManagementA plan can help you manage both sides of the balance sheet: Assets and liabilities. Of course, the first step to managing credit wisely is establishing a credit history with checking and savings accounts, credit cards and loans. A solid credit history can increase your ability to select the most favorable rates and terms and use credit, as needed, to meet important financial goals.
Insurance Needs:Adequate disability and life insurance can provide the income your family needs in the event of your incapacitation or death. A plan can help determine how much insurance is enough.
Tax Planning:Many American believe they're paying “too much” in taxes. But careful planning can help reduce your tax liability while increasing the amount available for important financial goals.
Retirement Planning:Because personal savings are likely to comprise a large percentage of your retirement income, it's important to start planning – and saving – as early as possible. Tax-advantaged accounts, such as 401(k) plans and Individual Retirement Accounts (IRAs) may offer the best opportunities to build retirement savings because they allow assets to grow tax-deferred. If you're eligible, also consider the new Roth IRA, which could leave you with substantially more in after-tax retirement income because qualified distributions are federally tax free.
Estate Planning:Estate and income taxes and settlement costs could erode up to 55% of your assets. Because each taxpayer is allowed to pass up to $650,000 to heirs estate-tax free, estate planning for many women consists primarily of executing a will and keeping beneficiaries up to date. Remember, without a will, the state will determine how your assets are distributed. For women with more substantial assets, it is critical to consult an estate-planning specialist about such tools as life insurance and trusts, which can help reduce estate taxes, provide adequate liquidity and increase the assets passed to heirs.